Golitko & Daly

Are Workers’ Compensation Benefits Taxable?

By Matthew Golitko on September 30, 2019

Calculating numbers at a deskIf you’ve been injured while on the job, workers’ compensation benefits can be extremely helpful in your road to recovery. Our Indianapolis, IN work injury lawyers have helped many clients with the workers’ compensation process, whether it’s applying for benefits, appealing denied claims, or taking a good look at how these benefits may affect their financial situation.

Many clients ask the lawyers of Golitko & Daly if their workers’ compensation benefits will be taxed. The answer can get a bit more complicated than a simple yes or no. Let’s address that question below right now, starting with a brief overview of how workers’ compensation benefits function.

How Workers’ Compensation Benefits Work

In basic terms, workers’ compensation is a type of insurance that provides monetary benefits and/or medical care for workers who are injured or develop an illness as a direct result of an accident that occurred on the job.

Workers compensation’ will help cover:

  • The medical expenses to treat the injury or illness
  • Replacement income while recuperating away from the job
  • Costs related to job retraining
  • Compensation for permanent injuries that result in disability
  • Benefits to survivors of a worker killed while on the job

Workers’ Compensation Benefits Are Usually Not Taxable

For the vast majority of workers’ compensation recipients, their benefits will not be taxed.

This tax exemption applies to federal taxes as well as Indiana state taxes. This means that any workers’ compensation benefits received by an injured worker are tax exempt; the same applies to surviving loved ones collecting workers’ compensation death benefits.

Even though the majority of people receiving workers’ compensation will have tax-exempt status on these benefits, that is not always the case. Our Indianapolis work injury attorneys want to discuss an important exception to this rule.

Exceptions to the Rule: Workers Also Collecting SSI or SSDI

If you are collecting workers’ compensation benefits and also collect Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI), your workers’ compensation benefits will be taxed to a certain extent. Usually this means that your workers’ compensation benefits will reduce your SSDI or SSI benefits, and this difference created will be subject to taxes depending on how much income you receive by the end of the year.

If this describes your situation, it’s a good idea to speak with your accountant or a tax professional about your workers’ compensation and Social Security Disability and how this may affect you during tax season. Preparing well ahead of time is preferable to facing a steep and unexpected tax bill when you file.

Advice from Our Work Injury Lawyers

Financial and practical matters related to workers’ compensation benefits can be confusing to people, which is understandable. If you even have questions about your rights and obligations following a workplace injury, our Indianapolis occupational accident lawyers are here to help. We can answer your questions, address your concerns, and provide sound advice on how to proceed.

Learn More About Workers’ Compensation Laws

For more information about workers’ compensation and what you should know about benefits after recovering from an on-the-job injury, speak with skilled work injury and accident lawyers. The team at Golitko & Daly can be contacted by phone at (317) 566-9600.

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